A profit-maximizing monopolist ________.
A) can set any price she chooses
B) produces until Marginal revenue = Marginal cost and reads the price off the demand curve at that quantity
C) takes the market price as given
D) produces the level of output at which Price = Average total cost

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist will produce where Marginal Revenue (MR) = Marginal Cost (MC) and the price they charge will be read off the demand curve at that quantity. They cannot simply set any price they choose because they still have to be aware of the level of demand at that price. They also do not take the market price as given because they have the ability to influence the market price through their production decisions. Finally, producing at the level of output where Price = Average Total Cost (ATC) would result in zero economic profit, which is not the goal of a profit-maximizing monopolist.

A Profit-Maximizing Monopolist ________